Page 90 from: Recycling International free issue 3 2023

MARKET ANALYSIS

Prices resilient but
imbalances remain
London Metal Exchange prices have been sustained after China removed Covid

restrictions and inflation levels globally appeared to have peaked. But market

participants continue to face significant obstacles.

is projected to increase another 10%
in 2023, resulting in an expected
global supply surplus of 239 000
tonnes this year, equivalent to 7.6% of
world nickel usage. In light of the
global market imbalances and price
uncertainty, participants continue to
seek out alternative financial instru-
ments to hedge their risk exposure
following the meltdown in LME nickel
trading last year.

NEW CONTRACTS?
There has been considerable specula-
tion about the creation of new
exchange-traded nickel contracts but
the Financial Times reported in April
that the CME Group had decided to
not launch one, according to state-
ments from CME Group chairman and
ceo Terry Duffy. According to Edward
Meir from the Marex Group, a new
Class 2 nickel contract would be more
useful than another Class 1 nickel con-
tract given the increasing share of
nickel pig iron and nickel sulphate
production and consumption by nickel
and stainless steel market partici-
pants.

PRODUCTION SLUMP
According to the latest estimates from
the World Stainless Association
(worldstainless), global stainless steel
melt shop production declined 5.2%
year-on-year in 2022 to 55.26 million
tonnes. Among the major stainless
steel producing regions, worldstain-
less reports melt shop production in
Europe declined 12.4% in 2022,
accompanied by a 14.8% decrease in
the United States. While China
remains the world’s dominant produc-
er of stainless steel, Chinese melt
shop production declined 2% in 2022
to 31.975 million tonnes. According
to the CRU Group, stainless steel end-
use demand slowed significantly in
the second half of 2022 ‘as mounting
inflationary pressures and rising inter-
est rates steered consumers away
from durable goods. Demand from
the construction sector and from
household appliance manufacturers in
particular was severely hit by the eco-
nomic slowdown’.

time’. Average daily trading volumes
on the LME were down by 15% year-
on-year in March and by 14% over the
first three months of the year.
Shanghai Future Exchange nickel trad-
ing volumes were down more than
50% in Q1 2023 as compared to Q1
2022, according to SHFE data.

EXCESS SUPPLY
A recurring theme has been excess
global supply of primary nickel, nickel
pig iron, and other sources of Class 2
nickel. According to the latest esti-
mates from the International Nickel
Study Group, world refined nickel pro-
duction increased 17.3% in 2022 and

90

Despite concerns that global nickel
production will continue to exceed
demand this year, LME nickel prices
held up relatively well at the start of
the second quarter. As nickel invento-
ries in LME warehouses dipped to
nearly 40 000 tonnes at the end of
April, LME nickel prices have been
hovering around US$ 24 000 per
tonne recently, up from around US$

22 000 per tonne in late March.
According to Macquarie Research,
‘the resilience of LME nickel prices
during April was in contradiction to
the trend in prices for nickel pig iron
and nickel sulphate which traded at
growing discounts to LME. For nickel
pig iron (over 50% of world produc-
tion), April average prices were less
than 60% of LME prices for the first

90-91_manickelstainless.indd 90 04-05-2023 09:06